If you’re planning to purchase property, you may need an appraisal, especially when financing it. Property appraisals are generally required by lending institutions, but they’re also valuable for you. In this article we’ll tackle the question, “what is a property appraisal?” and review why you may want to have one performed, even if it’s not required.

Property Appraisals Explained

A property appraisal determines the estimated market value of a property. It’s performed by a professional appraiser who evaluates your property and prepares the report.

There are two methods that are generally used to determine the market value of your property: the sales comparison method and the cost method.

The sales comparison method compares your property to other similarly situated properties in the area. Beside the location, an appraiser may consider factors such as recently sold listings, features of the property, age, condition, etc.

Alternatively, the cost method calculates the replacement cost of the property if it were destroyed. This method is typically used with new homes.

Using either method, the appraiser will gather facts, statistics, and other information to develop his or her opinion as to the market value of the property. Most states require appraisers to be licensed. In Texas, appraisers are regulated by the Texas Appraiser Licensing & Certification Board (TALCB).

When is an appraisal useful?

Property appraisals are performed on various types of properties for different reasons. For example, a seller may have an appraisal performed to determine the appropriate sales price of their property. An appraisal also helps purchasers make an informed decision on whether to purchase the property and the amount they should pay for it. But there are other reasons for ordering an appraisal.

Let’s say you’re interested in remodeling an existing property. Or you want to renovate a newly acquired one. An appraisal can help you determine whether it’s worth the time and effort to do so, or how much money you should allocate towards the project.

Insurance companies also use the appraised value of your home in setting insurance limits and values. Tax assessors will appraise your home to calculate your property taxes. Finally, local governments may use the appraisal value of private property to calculate its cost if they’re looking to acquire it for public use.

Will the bank or mortgage company get an appraisal?

If you’re planning to finance a property, banks, mortgage companies, and other lending institutions will order a property appraisal to help determine how much money to lend you. This appraisal value is important to these lending institutions since the property is the collateral for the mortgage loan.

Do you have other questions about appraisals?

We are here to help you find the best land deal out there. If you have questions about appraisals or the value of a property, contact us by phone or email. Tony Malley of Texas Land Brokers is both a lawyer and real estate broker. Unlike other agencies, he can provide you with the legal assistance and real estate services. Texas Land Brokers provides personal assistance and a turnkey real estate experience.